Personal Finance

Protecting Your Retirement Nest Egg Against Inflation


by Alli Thomas

Feb 25, 2020

A recent survey by ThinkAdvisor asked financial advisors their opinions about the biggest mistakes they see retirees making.


Failing to plan for inflation risk is one of them. People are living longer than ever. It’s not unheard of for workers who retire at 65 today to spend 20 years or more in retirement.


As a refresher, inflation is the increase in the cost of living over time. Remember when gas cost 99 cents per gallon—and now (depending on where you live in the U.S.) you’re paying $3.50 a gallon? That’s an example of inflation.


Inflation eats away at the purchasing power of your money over time. In other words, the money you have saved today won’t go as far in 10 or 15 years. Perhaps one of the biggest reasons inflation risk is so overlooked is because it’s been growing at such a low rate for a long time—basically since the early 1980s. But that doesn’t mean it still doesn’t pose a threat.


Here are some tips that may help you manage inflation risk:


  • Look at your retirement budget and figure out what you’ll need to “earn” each year. By that, I mean how much money you’ll receive between Social Security benefits and retirement savings withdrawals. Now imagine how your budget might be affected by interest-rate movements. Pay special attention to healthcare costs, which for most retirees are the single largest expense.



  • Using your investments as a hedge against inflation. Treasury inflation-protected securities (TIPS) and real estate investment trusts (REITs) are two possible solutions. Neither asset class is highly correlated to the stock or bond markets, so they may offer attractive diversification benefits for your portfolio.


Does your retirement strategy have what it takes to resist inflation? If you’re not sure, click here to set up some time to speak to one of our financial advisors.

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Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k) administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

One Response

  1. Avatar Olga Barnwell-Gift says:

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